1. Client Update - Second Half of 2021
Paul Caylor, CDFA, CFP, CKA, RICP | President & Wealth Advisor | August 2, 2021
2. • The economy officially fell into recession in early 2020 for two months due to the economic shutdown
from COVID-19.
• Prior to this, the economy had been experiencing the longest cycle in history, surpassing the decade-long
cycle of the 1990s
• The economy is now at record levels and growing at a rapid pace.
3. • This chart shows the S&P 500 index alongside its trailing 12 months earnings-per-share.
• Over the long run, the stock market tends to follow earnings. If earnings are rising, investors are willing to
pay more per share.
• Earnings, in turn, tend to track economic growth. Thus, a healthy economy tends to result in a rising stock
market.
4. • CPI is a commonly cited measure of inflation. It uses a basket of goods and services to track price changes
for consumers.
• In order to measure the underlying trend in inflation, rather than temporary shocks to food and energy,
economists often focus on Core CPI.
• Inflation has begun to heat up as the economy reaches new historic peaks.
5. • The U.S. has historically run a budget deficit each year.
• The deficit is simply the difference between federal government revenues and expenses.
• Deficits tend to spike during recessions and wars.
6. • The Fed has kept interest rates at the zero lower bound since the pandemic began.
• Most importantly, the Fed also announced that it will allow inflation to run hotter before adjusting policy.
• This has spurred fears of rising inflation which has pushed many interest rates higher this year.
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8. PrudentWealth Disclosures
Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra
Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Prudent Wealth is not affiliated with Kestra IS or Kestra AS. Kestra IS and Kestra AS do
not provide tax or legal advice. https://www.kestrafinancial.com/disclosures